When the school entered a financial agreement to build the $4.5 million King's and Queen's Performing Arts Centre in 2005, it was under the impression it could draw down its five-year property plan funding from the Ministry of Education, to help pay off the loan.
However, this was incorrect and now the school is using ministry operations grant funding to pay about $4800 a month to keep up with the interest on the loan.
During a parliamentary debate on Tuesday night, Labour education spokesman Trevor Mallard said the solution to the problem lay in changing the Education Amendment Act to allow King's to use its five-year property plan credit, or about $400,000 of it, to repay the loan.
"It is money that would otherwise be used for the direct educational benefit of kids, and the school has indicated to me that its top priority ... for spending that money would be to apply it to the repayment of the loan."
However, during the debate, Education Minister Anne Tolley said if the school's principal and board of trustees had listened to the ministry when the facility was being planned, they would have known they could not use that funding to repay the loan.
"The five-yearly agreement funding is provided to refurbish existing property.
"If we allow it for one school to come back later and say: 'Oh, hang on a minute. We didn't do this properly, and now we would like to remedy this because we are paying out of our operations grant for a loan,' we will open the floodgates and destroy our policy."
Mrs Tolley yesterday told the Otago Daily Times she had been in discussions with principal Dan Reddiex about the issue.
"I also understand the school is not in any financial difficulty and has considerable financial reserves."
Mrs Tolley said Mr Mallard had asked former education ministers Steve Maharey and Chris Carter to do a similar thing to what he was asking Mrs Tolley to condone.
". . . And they declined," she said.
Concerns about the funding are not new.
In 2006, shortly before the centre was completed, former principal Colin Donald wrote to Mr Maharey, suggesting former education minister Mr Mallard was responsible for the situation the school was in.
"We accepted that the $1 million special grant committed us to a shared project with Queen's High School," Mr Donald wrote.
"However, it also committed us to building something other than what Queen's already has - that is, a standard assembly hall and stage.
"Therefore, our board's decision to build a performing arts centre came about directly from this imposed position by the then Minister Trevor Mallard."
Neither Mr Reddiex nor board of trustees chairman Shane Atherton could be contacted for comment last night.
